Whether fraud occurs to an individual or to the government, the perpetrator can be sued. The material on which the fraud is been performed could be in monetary terms or other benefits such as illegally gaining a driver’s license and even obtaining a mortgage with the help of wrong documents. Fraud also occurs at the level of institutions such as the banks. Some common bank frauds include;
Kitting of checks
This is a kind of bank fraud in which the bank makes use of funds that do not exist to clear a check or pay another bank account during a period known as a float. This means that making this payment is like making an unauthorized credit to the client. Kitting can also be seen as the act of intentionally writing a greater value check than there are funds in that account in one bank, to cover the missing fund from the first check, a second check is written from another bank account which still does not have sufficient funds. Without this inflation of the balance in the account the check will bounce. Usually the account is later balanced in what is known as a payday (this is called playing the float). In the case where it is no balanced the fraud turns to be a paper hanging.
One of the ways through which a fraud can occur in a bank is through stolen checks, if an individual has access to certain facilities like post offices, mailrooms, veterans’ benefit office, whose job is the processing of checks in huge numbers. Once the fraudster has stolen checks from one of the named offices they later use hypothetic names to open accounts under which they deposit these checks. They later alter these accounts and make them appear legitimate and then they withdraw the unauthorized funds.
Altered checks and Forgery
With the advancement of technology it has become a big problem for businesses and financial institutions that receive checks. Tools like computers and a number of editing soft wares can be used by an individual or gang to falsify a check which the innocent individual or the financial institute expects to receive as an equivalence of their money in the exchange of goods and services.
Most checks frauds occur by counterfeiting using computers and publishing softwares to copy or duplicate an existing financial document, it could as well occur by chemical alteration where most of the check content is removed so that it could later be used illegally. All of this begins with the illegal possession of the financial document of the account holder for example stealing a person’s blank check, or searching someone’s garbage and finding a cancelled check or acquiring a check from a mail box destined for payment.
This practice is mostly observed from businesses which have been known to use bookkeeping which can be manipulated to show that the company is doing well in terms of sales and income. Usually this is done by inflating the net wealth and value of the company whereas the company runs under a lost. By so doing the business proprietor can use this state of his company to sell bond of the company at higher rates or in a situation where they need to present the company as collateral in order to obtain a loan they will fraud the financial state of the company in a view that the loan will save the bank.
An example of such acts is recorded by the group Enron Corporation,which was a company based in Houston, Texas founded in 1985 as 2 companies Houston Natural gas and InterNorth which were relatively small companies that came together. This was a very successful group according to Fortune who named them six years running as America’s Most Innovative Company as it claimed a revenue of $ 101 billion in 2000. By the end of the year 2001 this Corporation which was dealing with electricity, communication, natural gas and pulp and paper companies and whose balance sheet showed a high income revenue was proven to be a smartly planed accounting fraud which since then is known as the Enron scandal.
There are certain banks that accept public deposits as one of their services whereas they are not licensed to do that or they have no insurance that covers the service they offer. Such banks might be selling stocks and has an official name as a bank who offers deposit services whereas they do not and this is recorded as a fraud by such a banking institute.
Frauds on loan
This has a wide range of application, when a loan is to be taken by an individual whose financial earning status are not the best he turns to falsify certain information about his financial history like unpaid loans from another financial institute. Others will like to make the financial institute believe they are going into a fruitful investment when giving their client a loan because the client used a false balance sheet that shows that his company is doing well.